We analyze corporate fraud in a setting in which managers have superior information but are biased against liquidation, because of their private benefits from empire building. This may induce them to misreport information and even bribe auditors when liquidation would be value-increasing. To...

Stricter laws require more incisive and costlier enforcement. Since enforcement activity depends both on available tax revenue and the honesty of officials, the optimal legal standard of a benevolent government is increasing in per-capita income and decreasing in officials’ corruption. In...

Using a representative sample of Italian investors, we estimate the risk associated with pension benefits by eliciting for each individual the subjective distribution of the replacement rate as a summary indicator of social security wealth. We find substantial heterogeneity of pension risk and...

Prior research suggests that those who rely on intuition rather than effortful reasoning when making decisions are less averse to risk and ambiguity. The evidence is largely correlational, however, leaving open the question of the direction of causality. In this paper, we present experimental...

In this paper we focus on poor financial literacy as one potential factor explaining lack of portfolio diversification. We use the 2007 Unicredit Customers’ Survey, which has indicators of portfolio choice, financial literacy and many demographic characteristics of investors. We first propose...

Using a large sample of retail investors as well as experimental data we find that risk and ambiguity aversion are positively correlated. We show the common link is decision style: intuitive thinkers tolerate more risk and ambiguity than effortful reasoners. One interpretation is that intuitive...